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M&T Bank (MTB) Q3 Earnings Miss on Higher Costs, Provisions
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M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.83 in third-quarter 2022, which lagged the Zacks Consensus Estimate of $4.21. The bottom line compares favorably with $3.76 per share reported in the year-ago period.
Shares of MTB lost more than 5% in pre-market market trading on lower-than-expected quarterly performance. Higher provisions and lack of sequential loan growth weighed on investor sentiments.
The results were adversely impacted by an increase in credit costs, higher expenses and a fall in non-interest income. Yet, a rise in net interest income (NII) on net interest margin expansion, higher rates and balance sheet strength offered some support.
The net income available to common shareholders in the reported quarter was around $621 million, jumping 30% from the prior year.
Revenues Jump on Higher NII, Expenses Rise
M&T Bank’s quarterly revenues totaled $2.24 billion, missing the consensus mark of $2.30 billion. Nonetheless, the reported figure jumped 46% year over year.
NII, on a taxable-equivalent basis, surged 74% year over year to $1.7 billion. This was mainly driven by a higher net interest margin and the impact of earning assets from the People's United acquisition. The net interest margin expanded 94 basis points (bps) to 3.68%.
The company’s non-interest income was $563 million, down 1%. Lower mortgage banking revenues mainly led to the fall.
The non-interest expenses totaled $1.3 billion, flaring up 42%. The upsurge mainly stemmed from the impact of the acquisition of People's United. Excluding non-operating charges, the non-interest operating expenses were $1.2 billion.
The efficiency ratio was 53.6%, down from 57.7% in the year-earlier quarter. A lower ratio indicates a rise in profitability.
Loans and leases, net of unearned discount, were $128.2 billion at the end of the reported quarter, relatively stable from the prior quarter. The total deposits declined 4% to $163.8 billion.
Credit Quality Deteriorates
The net charge-offs increased 58% on a year-over-year basis to $63 million. The non-performing assets rose 9% to $2.5 billion. The company recorded a provision for credit losses of $115 million against a recapture of $20 million in the year-ago quarter.
Nonetheless, the ratio of non-accrual loans to total net loans was 1.89%, down from 2.40% year over year.
Capital & Profitability Ratios Strong
M&T Bank’s estimated Common Equity Tier 1 ratio was 10.7%, down from 11.1% as of Sep 30, 2020. The tangible equity per share was $84.28, down from $86.88 as of Sep 30, 2021.
M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity were 1.44% and 17.89% compared with 1.34% and 17.54%, respectively, in the prior-year quarter.
Share Repurchase Update
The company repurchased 3.3 million shares of its common stock in the third quarter for $600 million.
Our Viewpoint
M&T Bank put up a decent performance in the third quarter. Balance sheet and revenue growth was primarily driven by its acquisition of People's United. The solid loan balance will likely continue aiding organic growth in the days to come. However, worsening credit quality and elevated expenses were headwinds.
M&T Bank Corporation Price, Consensus and EPS Surprise
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
Disappointing IB performance, bigger reserve build and increase in operating expenses hampered JPM’s quarterly performance to some extent.
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
Results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates drove the increase in NII, which was a major positive for TFC.
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M&T Bank (MTB) Q3 Earnings Miss on Higher Costs, Provisions
M&T Bank Corporation (MTB - Free Report) reported net operating earnings per share of $3.83 in third-quarter 2022, which lagged the Zacks Consensus Estimate of $4.21. The bottom line compares favorably with $3.76 per share reported in the year-ago period.
Shares of MTB lost more than 5% in pre-market market trading on lower-than-expected quarterly performance. Higher provisions and lack of sequential loan growth weighed on investor sentiments.
The results were adversely impacted by an increase in credit costs, higher expenses and a fall in non-interest income. Yet, a rise in net interest income (NII) on net interest margin expansion, higher rates and balance sheet strength offered some support.
The net income available to common shareholders in the reported quarter was around $621 million, jumping 30% from the prior year.
Revenues Jump on Higher NII, Expenses Rise
M&T Bank’s quarterly revenues totaled $2.24 billion, missing the consensus mark of $2.30 billion. Nonetheless, the reported figure jumped 46% year over year.
NII, on a taxable-equivalent basis, surged 74% year over year to $1.7 billion. This was mainly driven by a higher net interest margin and the impact of earning assets from the People's United acquisition. The net interest margin expanded 94 basis points (bps) to 3.68%.
The company’s non-interest income was $563 million, down 1%. Lower mortgage banking revenues mainly led to the fall.
The non-interest expenses totaled $1.3 billion, flaring up 42%. The upsurge mainly stemmed from the impact of the acquisition of People's United. Excluding non-operating charges, the non-interest operating expenses were $1.2 billion.
The efficiency ratio was 53.6%, down from 57.7% in the year-earlier quarter. A lower ratio indicates a rise in profitability.
Loans and leases, net of unearned discount, were $128.2 billion at the end of the reported quarter, relatively stable from the prior quarter. The total deposits declined 4% to $163.8 billion.
Credit Quality Deteriorates
The net charge-offs increased 58% on a year-over-year basis to $63 million. The non-performing assets rose 9% to $2.5 billion. The company recorded a provision for credit losses of $115 million against a recapture of $20 million in the year-ago quarter.
Nonetheless, the ratio of non-accrual loans to total net loans was 1.89%, down from 2.40% year over year.
Capital & Profitability Ratios Strong
M&T Bank’s estimated Common Equity Tier 1 ratio was 10.7%, down from 11.1% as of Sep 30, 2020. The tangible equity per share was $84.28, down from $86.88 as of Sep 30, 2021.
M&T Bank's return on average tangible assets (annualized) and average tangible common shareholder equity were 1.44% and 17.89% compared with 1.34% and 17.54%, respectively, in the prior-year quarter.
Share Repurchase Update
The company repurchased 3.3 million shares of its common stock in the third quarter for $600 million.
Our Viewpoint
M&T Bank put up a decent performance in the third quarter. Balance sheet and revenue growth was primarily driven by its acquisition of People's United. The solid loan balance will likely continue aiding organic growth in the days to come. However, worsening credit quality and elevated expenses were headwinds.
M&T Bank Corporation Price, Consensus and EPS Surprise
M&T Bank Corporation price-consensus-eps-surprise-chart | M&T Bank Corporation Quote
Currently, M&T Bank carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Major Banks
Higher loan balance, rising rates and solid markets performance drive JPMorgan’s (JPM - Free Report) third-quarter 2022 earnings of $3.12 per share, which surpassed the Zacks Consensus Estimate of $2.97. The results included $959 million or 24 cents of net investment securities losses in the Corporate segment. Our estimate for earnings was $2.98 per share.
Disappointing IB performance, bigger reserve build and increase in operating expenses hampered JPM’s quarterly performance to some extent.
Truist Financial’s (TFC - Free Report) third-quarter 2022 adjusted earnings of $1.24 per share missed the Zacks Consensus Estimate of $1.26. The bottom line declined 12.7% from the prior-year quarter. Our estimate for earnings was $1.30.
Results have been primarily hurt by a decline in non-interest income and higher provisions. Nevertheless, average loan growth and higher rates drove the increase in NII, which was a major positive for TFC.